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Given the number of people in India and the poverty of all too large a number of them, that India is going to be the world's fastest growing large economy this year is good news. Poverty is, after all, simply a lack of both stuff to consume and the wherewithal to purchase such, and economic growth is defined as more stuff and the incomes to purchase such. Thus economic growth is, by definition, the solution to poverty. And it really is true that rural India contains one of the world's great reservoirs of true, absolute and abject, poverty. So, a predicted growth rate of 7.3% for the last quarter of last year, with that rate expected to be maintained in the year to come is good news.

India is forecast to become the fastest growing large economy in the world, surpassing that of China. Figures to be released by the Central Statistics Office are expected to confirm the country grew by 7.3 % from October to December, while China grew 6.8% in the same period. If confirmed, the figures will be good news for Minister Narendra Modi who swept to power in 2014 on the single agenda of development.

It's not just good news for the politician in charge of it, it's good for the people of the country too. There're worries though about the future. Well, there are worries about the present too but as ever in an economy, we need to look at the short term, where macroeconomics holds sway, and also at the long term, where it's microeconomics all the way down.

On that short-term front there are worries about whether the economic numbers are quite as good as presented, leading to worries in the bond markets:

The annual budget, which garners significant market attention each year, assumes greater importance this time as markets test Modi’s commitment to fiscal consolidation that is also key to determining the path of India’s monetary policy after the biggest interest-rate cuts in six years in 2015.

The rupee, sovereign bonds and stocks posted their steepest January losses since 2011 as concern mounts that a higher wage bill and increased public spending to spur economic growth will derail the government’s plan to narrow the budget deficit. A China-led turmoil in emerging markets and the prospect of more increases in U.S. borrowing costs gave investors more reasons to dump Indian stocks, resulting in the biggest outflows since August and making the rupee Asia’s worst-performing currency last month.

However, a lower rupee has its own merits; it makes exports cheaper for the buyers. Exports are an addition to GDP. And then there's the vast change in India's import bill as a result of the change in the oil price.

A record fall in crude oil prices has boosted the economy as almost 70% of India's imports are fuel. The country is the third largest importer of crude oil behind America and China.

My own opinion is that that is going to be a sufficient boost to the economy pretty much whatever the government manages to do with the deficit. Yes, a lower rupee masks some of that effect as it increases the local cost of the imports, but the fall in the oil price is so massive that that effect predominates. However, that is all macroeconomics and to keep the growth going India is going to have to conduct an impressive amount of supply side reform:

In the 2016 report of the World Bank for Doing Business - India is ranked a low 130 out of 189 countries. The Prime Minster's target is to be amongst the first 50 three years from now.

Effectively the country needs the destruction of the entire Licence Raj. Much has already been done but there's still a lot to do. And as is always the way, whatever is the current system has significant political support from those who benefit from that current system. It's a strange but also true observation that China, nominally ruled by a Communist Party, is actually more free market than India. Perhaps not in some of the formal measures but the Chinese economy, as it actually works, is in that private sector one of the most viciously free market on the planet at present. And India's only going to be able to have those decades of high growth, as China has had, if it mimics that part of the economy.